Finance and Accounting Corporate Finance

Finance and Accounting Corporate Finance
Project description

British airways, Easyjet, Ryanair , Emirates airline and jet airways,

The group coursework report’s requirements are as follows:

1. Analyze the corporate governance structure of the 5 airlines companies and in the context of published literature of agency theory; critically assess where the power in the firm lies and the potential for conflicts of interests at the firms.

2. Develop a risk profile for your firms, estimate risk parameters, and use these parameters to estimate cost of equity and cost of capital for the firms. Investigate how systematic risk factors are taken into account in your company and critical analyze the impact of financial leverage on your company’s risk level.

3. Examine current financing choices and the trade-off between debt and equity for your firms; Investigate the possibility of alternative methods of debt financing with their advantages and disadvantages, fully costed (where possible), and make recommendations of the optimal mix. Considering the equity base of your company, critically outline the options available should the firm need to raise further equity funds. Also consider if preference shares should be employed.

The final submission should include:
Now for the 3 separate individual reports requirements:

3 separate short reports in separate files of around 1000 words on each. so ( 1000 words on British airways, 1000 words on Easyjet and 1000 words on Ryanair ) FOLOWING THEY REQRURMENTS UNDERNETH WHICH ARE :

• Each company risk’s profile and capital structure ,develop a risk profile for your firm, estimate risk parameters, and use these parameters to estimate cost of equity and cost of capital for the firm. Investigate how systematic risk factors are taken into account in your company and critical analyze the impact of financial leverage on your company’s risk level.

• Examine current financing choices and the trade-off between debt and equityfor your firm; Investigate the possibility of alternative methods of debt financing with their advantages and disadvantages, fully costed (where possible), and make recommendations of the optimal mix. Considering the equity base of your company, critically outline the options available should the firm need to raise further equity funds. Also consider if preference shares should be employed

 

 
Note:
1. The key to producing a high quality report is critical analysis. Credit will be given for opinions supported by evidence. Credit will not be given for lists, for example names of directors and how often they attended meetings, copied from annual reports without critical comment.
2. You can present the report in a format that works best for you.
3. Use tables to summarize data and findings where you can. In your group report, since the analysis is paralleled across the companies, you might find it useful if you start each section with a table that summarizes your findings for that section across the companies in your group.
4. You should have all the companies discussed in an integrated report in the group report, by section.
5. Include copies of the data sources that you used for your report (such as the London Stock Exchange website information or annual reports) in an appendix and provide an appropriate reference list for all sources. Do not give me complete copies of annual reports, just pages from which you have derived information.

Sources of information:
1. Databases:
Bloomberg (
Datastream
FAME,
OSIRIS
2. Websites:
Financial Time www.ft.co.uk
London Stock Exchange www.londonstockexchange.com (you can get the company’s PDF file from the website),
Bloomberg www.bloomberg.com (you can get the company’s PDF file from the website)
Yahoo Financehttp://uk.finance.yahoo.com
Company websites

 
COURSEWORK MARKING SCHEME

Live Case Study Part 1. Corporate Governance Analysis
(30 marks)
Objective: To analyze the corporate governance structure of the firm and assess wherethe power in the firm lies and the potential for conflicts of interest at the firm.

Key Questions

• Is this a company where there is a separation between management and ownership? If so, how responsive is management to stockholders?
• Is there a potential conflict between stockholders and lenders to the firm? If so, how is it managed?
• How does this firm interact with financial markets? How do markets get information about the firm?
• How does this firm view its social obligations and manage its image in society?
Live Case Study Part 2. Risk Profile Analysis
(35 marks)
Objectives: To develop a risk profile for your company, estimate its risk parameters, and use these parameters to estimate cost of equity and capital for the firm.
Key questions
• Run the regression to estimate the CAPM parameters for the company. What is the risk profile of your company? How much overall risk is there in this firm? Where is this risk coming from (market, firm specific?), How is the risk profile changing?
• What is the performance profile of an investment in this company? What return would you have earned investing in this company’s stock? Would you have under or outperformed the market? How much of the performance can be attributed to management?
• How risky is this company’s equity? Why? What is its cost of equity?
• How risky is this company’s debt? What is its cost of debt?
• What is the mix of debt and equity used by this firm to fund its investments?
• What is this company’s current cost of capital?
Live Case Study Part 3: Analyzing a Firm’s Current Financing Choices
(35 marks)
Objective: To examine a firm’s current financing choices, the trade-off between debt and equity , and the possibility of alternative methods of debt financing with their advantages and disadvantages, fully costed (where possible), and make recommendations for optimal capital structure.
Considering the equity base of your company, critically outline the options available should the firm need to raise further equity funds. Also consider if preference shares should be employed.

Key Questions
• Where and how does the firm get its current financing?
• Would these financing choices be classified as debt, equity, or hybrid securities?
• How large, in qualitative or quantitative terms, are the advantages to this company from using debt?
• How large, in qualitative or quantitative terms, are the disadvantages to this company from using debt?
• From the qualitative trade-off, does this firm look like it has too much or too little debt?
• Estimate WACC at different capital structures. From a quantitative trade off, what is the optimal capital structure for the company?
• Identify the available financing options. Please classify as debt (types, long term or short term), equity, or hybrid securities.
• In the context of trade off and pecking order theories, critically discuss the advantages/disadvantages of using those alternative financing options to the company.
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